Informal Employment: Safety Net or Growth Engine?

By Norman V. Loayza, Jamele Rigolini. 2011

246 citations recorded by the source corpus.

Summary Is informal employment a safety net or a growth engine? To address this question, this paper studies the trends and cycles of informal employment. It first presents a theoretical model of long- and short-run behavior of informal labor. Then it analyzes these relationships empirically, using the share of self-employment in the labor force as the proxy for informal employment. In the long run, informality is larger when labor productivity is lower, government services weaker, and business flexibility less prevalent. In the short run, informal employment behaves counter-cyclically, indicating that it acts primarily as a safety net. The degree of counter-cyclicality, however, varies inversely with the size of informal labor itself.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/45ae3f39ef38e3a3854a8ac31b6cdb5922677c6c

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Sociology and Political Science

Citations in the corpus

Roads, exports and employment: Evidence from a developing country (2017, background): “…empirical evidence points to a complex pattern of co-movement between the degree of formalization and macroeconomic fluctuations, the former may be thought to increase when the economy is growing, such as in Peru over the sample period (see, e.g., Fiess et al., 2010 and Loayza and Rigolini, 2011).”
Research on entrepreneurship in the informal economy: Framing a research agenda (2013, methodology): “In fact, self-employment has been used as a proxy for informality (e.g., Heemskerk, 2003; Loayza and Rigolini, 2011; Williams, 2005), although empirically, self-employment has minimal correlationwith other proxies of informality.”